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Name: Kevin
Country: United States
State: Illinois
Birthday: 12/24/1984
Gender: Male
Interests: pooning
Expertise: pwning
Occupation: Unemployed/Between Jobs
Industry: Textiles
Message: message meEmail: email me
Member Since:
3/30/2003
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| Honestly, all you need to know about investing:
"Stupid" investors, rejoice! Ben Stein Economist, writer, lawyer, and actor
No one is too stupid to make money in the stock market. But there are many who are too smart to make money.
To
make money, at least in the postwar world, all you have to do is buy
the broad indexes domestically--both in the emerging world and in the
developed world--and, to throw in a little certainty about your old
age, maybe buy some annuities.
To lose money, pretend you're
really, really clever, and that by reading financial journalism and
watching CNBC, you can outguess the market day by day. Along with that,
you must have absolutely no sense of proportion about money and the
world at large.
For example, right now we are stewing over what
everyone calls "the subprime mess" and going crazy, mourning all day
and into the night--falling over ourselves to get all of the misery
right, to paraphrase Evita. I'm writing this on Aug. 13, 2007, and in
the past four or five weeks, the markets of the U.S. have lost some 7%
of their value, or about $1 trillion.
But read on: The subprime
mortgage world is about 15% of all mortgages, or $1.5 trillion worth,
very roughly. About 10%--approximately $150 billion--is in arrears. Of
that, something like half is in default and will likely be seized in
foreclosure and sold. That comes to about $75 billion. Roughly half to
two-thirds of that will be realized on liquidation, leaving a loss of
maybe $37 billion. Not chump change by any means--but one-thirtieth,
more or less, of what has been knocked off the stock market.
The
"smart" investor nevertheless reads the papers, bails out, heads for
the hills, and stocks up on canned foods. He gets a really big charge
out of reading in the press that there are also problems in the mergers
and acquisitions market and that some deals will not go through because
there are problems raising the funds for the deal. He does not see that
the total value of the U.S. major stock markets (the Wilshire 5000) is
roughly $18 trillion. The value of the deals that have failed in the
private equity world is in the tens of billions or less. The loss to
investors--what the merger price was compared with the normalized
premerger price--is in the billions. It's real money, and I could buy
my wife some nice jewelry with it, but it's pennies in the national or
global systems.
The "smart" investor also reads that the Fed has
injected, say, $100 billion into the banking system in the last week or
ten days, and says, "Aha! The whole country is vaporizing. Look how
desperate the system is for money!" What he does not see is that the
Fed is always either adding or subtracting liquidity and that recent
moves are tiny in the context of a nation with a money supply in the
range of $12 trillion. No, the "smart" investor is far too busy looking
for reasons to run for cover and thinks he can outsmart long-term
trends.
The stupid investor knows only a few basic facts: The
economy has not had one real depression since 1941, a span of an
amazing 66 years. In the roughly 60 rolling-ten-year periods since the
end of World War II, the S&P 500's total return has exceeded the
return on "risk-free" Treasury long-term bonds in all but four ten-year
periods--the ones ending in 1974, 1977, 1978, and 2002. The first three
of these were times of seriously flawed monetary policy that allowed
stagflation, and the last one was on the heels of the tech crash and
the worst peacetime terrorist attack in the history of the Western
world.
The inert, lazy, couch potato investor (to use a phrase
from my guru, Phil DeMuth, investment manager and friend par
excellence) knows that despite wars, inflation, recession, gasoline
shortages, housing crashes in various parts of the nation, riots in the
streets, and wage-price controls, the S&P 500, with dividends
reinvested, has yielded an average ten-year return of 243%, vs. 86% for
the highest-grade bonds. That sounds pretty good to him.
The
"smart" investor, in a bunker in the Montana wilderness, keeps his
money in gold bullion. After all, he's heard that home prices are
falling slightly nationwide and a lot in some areas (he ignores areas
of rising prices like San Francisco and New York City). He says that
this will discourage the consumer and lead to a severe, bottomless
recession. He even has bald people on TV telling him he's right to
worry.
The stupid investor, the guy who just lies on his couch,
knows that the consumer is always about to stop buying and never quite
does. Maybe someone in his bowling club has told him there has only
been one year since 1959 when consumer spending fell--and that was
barely, in 1980. Somehow, if the consumer could keep spending after the
bursting of the tech bubble wiped out $7 trillion or so of wealth,
maybe the consumer can keep spending even if the subprime "mess" wipes
out roughly half of 1% of that tech-bubble loss and the stock market
has a fit. And maybe he knows that, even if there is a recession,
recessions rarely last more than two quarters, and the economy and the
stock market revive mightily after that--and that buying stocks in a
recession is a good idea, not a bad idea.
Now, the alert reader
may at this point be saying, "Hey, that `stupid' guy who's really smart
is a long-term investor. That's why he's doing so well." Correctamundo,
alert reader. There used to be a saying: "Bulls make money and bears
make money, but hogs get slaughtered." I am not sure that was ever
true, but it sure ain't now. The real story is that long-term investors
who have some sense of proportion make money. Short-term investors who
live and die by the sweep-second hand of the $300,000 watch get rich
fast and poor fast and sometimes are slaughtered faster. I have no
advice for them except that the next train may be bringing in someone a
little younger who's a little faster on the draw and a lot hungrier, so
they'd better enjoy their Gulfstream while they have it.
For the
rest of us, the stock market is cheap on a price-earnings basis,
profits are fabulous, Mrs. Clinton and Mr. Giuliani are far from being
socialists and in the long run, both here and abroad, stocks are a
lovely place to be. I have no idea what the S&P will be ten days
from now, but I am confident it will be a lot higher ten years from
now, and for most Americans, that's what we need to think about. The
subprime and private equity and hedge fund dogs may bark, but the stock
market caravan moves on.
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| Faith is not the opposite of reason. Faith rests squarely upon reason, but with the added component of revelation.
- Francis Collins
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| I'll be the first to admit
that i worry about tommorow
that i want to do something great, but i don't know what
that means just yet
that i wish i had musical talent
that i avoid making decisions
that i understand where my depressed patients are coming from
that perception is everything
that time is running out
that i tell myself tomorrow will be better, even though
sometimes its not
that i got more than an ace up my sleeve...i hope
"How many special people change?
How many lives are living strange?"
Champagne Supernova ~ Oasis
"We've all been raised on television to believe that one day
we'd all be millionaires, and movie gods, and rock stars. But we won't. And
we're slowly learning that fact."
~Tyler Durden | Fight Club | | |
| Okay
I got something to talk about.
So about 2 years ago I went to this seminar (non-church) that talked about the origin of evil. Basically it was how can a benevelont, all powerful God, allow suffering in the world. If you want to read that post its about 2 pages back or something. So the topic was brought up in large group again this Friday... 2 years later. Well the exact topic was How can God allow suffering.
Now I'm not going to give a summary of that...because honestly I zoned out a little bit because I was thinking about my own thoughts on the origin of suffering, and this is my thoughts on it. Some notes before I start:
1. These thoughts are my own, and have not been endorsed by any religion/belief system, its just my way of looking @ the origin of suffering.
2. That being noted, i will say that when I say God, i do mean the Christian God, but if you don't believe in that, we can just as they say in AA, a higher being.
3. I will divide suffering into 2 main categories. a: Suffering caused by man (ie murder, rape, lying, cheating stealing, greed) b: Suffering caused by other causes (i would say mostly natural disasters, plagues, famine, disease etc)
4. I will only address the second form of suffering. Personally I feel the first category is caused by the shortcomings of man, that we are all noobs and suck at life. Whereas the second one really isn't anyone's fault
5. Yes, I have seen both forms of suffering first hand
6. I will also assume that most things (99%) have logical explanations and things need to make sense.
7. That being said, since I kind of like econ, and everything in economics is logical, i will likely be using econ terms that I wont' define, if you don't understand dictionary.com it.
8. Edit for JY: We Assume that A God exists
9. For JY again: I didnt run this through spell checker
Okay we shall begin.
So lots of people have a problem with suffering. How can a benevelont, all mighty, all knowing, loving God, allow suffering in the world. I have heard plenty of explanations but the way I like to look at it is like this:
God set up rules. Not to say these rules can't be bent or broken, or that he is constrained by his own rules, but he set up rules to govern everyday life. Gravity's acceleration, pi, the molecular weight of the hydrogen atom, avongadro's number, life, death are just a few examples of rules that govern everyday life. I will break this into 3 parts (actulaly probalby more but this is what i think now) Rules are necessary for human existance/societal development/existance in general, rules are the reason for suffering (and many other good things). 2. God is a logical God. 3. God lets nature play out by these rules, but he is not constrained by them.
Imagine a world where nothing can be predicted. Somtimes a boulder will roll down a hill at 9.8 m^2 per second, and crash into a tree. Then other times it'll roll down at .1 m^2/ second because there's a car crossing the street at the bottom of the hill. Lets take 3 past natural disasters that killed thousands of people and caused billions of dollars in damage:
a. Hurricane Katrina
b. Tsunami in Asia-Pacific
c. Pompeii Volcano Explosion (back in the day when an enitre civilization was killed by a volcano)
a. Hurricane Katrina: I'm not a meteoroligist, but im pretty sure basically a storm is created one cold stuff hits warm stuff, and the bigger the differential the bigger the storm. That is the rule. Let's say that rule didn't exhist. How would we have storms in general?
b. A tsunami is caused by a massive earthquake in the ocean, cause water to turn into this massive wave, that owns entire islands and coastal areas. Now lets say earthquakes didn't exhist anymore?
c. A volcano has been brewing for 10 years. And pressure is building up. right before the pressure hits a critical point and the entire mountain top is blown off, t Let's say volcanic eruptions didn't exhist anymore.
Instantaneously, without these rules God could have saved thousands of people, dollars and a entire civilization.
so number 1: Rules are necessary for existance/societal development/everyday life...and they result in some suffering
So what's so bad about that? If God can stop a million people from dying without explanation or slow down gravity, or stop a stray bullet, why doesn't he? Well because existance needs rules. Without rules people would be flipping out everyday. People can't stand not knowing what job they're going to get, let alone if the plane they are going to fly on is going to take off this time. Rules aren't entirely bad, with rules human society is forever evolving and improving. As humans we take rules, and run with them. We use them to improve our lives, and God chose rules over a ruleless society. yes rules cost people their lives. Fire burns hot, and some people die because of that rule. Bacteria grow fast, and lots of pepole die because of that rule. But God, must have felt that the cost of rules (some death and distruction) was outweighed by the utility that these rules give human society. How many lives have been saved because of techonology? How much better is our standard of living with crop rotation, airplanes, kung fu movies and the cotton gin? Back to katrina and the natural disaster examples:
1. If storms didn't exhist how would we irrigate our crops? How would we run in the rain, have fresh drinking water, and keep our rivers from drying out?
2. Without earthquakes and moving tatonic plates how would we have Mt. Everst, Hills, Valleys, Australia?
3. Without volcanoes how would land be created? There wouldn't be a Hawaii, and Tiki bars, and volcanic helicopter tours.
Conclusion: the existance of storms, earthquakes, volcanos, bacteria and all that jazz do result in a lot of suffering (the results of certain natural laws/rules), but they also result in good things...and i would like to argue that the good>bad.
2. God is a logical God, and knows that rules need to exist:
Well you can say, lets say God can just make thigns happen. Storm here where crops need water, earthquake here to make Australia, and volcano here to make hawaii. If all things that might cause a natural disaster can't be explained the world would just be a crazy place of random events. And God doesn't want that (for the above reasons, that rules are good) God is a logical God, so he set the rules, and lets them play out. Why do I feel God is a logical God? Well first because these rules that govern our society, but also look at Jesus. There was a rule: 1. People are sinners, and sin = death. God knew he couldn't have sinners around him because he was perfect, so logicallys peaking the only way to save humanity is to take away its sin. IE Jesus. God acknowledges the first law of physics: for every reaction there is an equal an opposite reaction, he not only acknowledges he made that rule.
3. Well God did perform miracles....
So yes, God does break rules from time to time. Water to wine, Jesus Walking on Water, small army defeating big army. If God is so Logical and so rule based how come sometimes he can break the rules and sometimes he can't? Well I would say its not that he can't, its more that he chooses not to. Why doesn't he choose to break his rules even more? Well I say cause he's planned these rules from the beginning
and has seen the future, and he knows that the rules he set forth are solid, and things will happen like they need to happen. I'm sure he knew he would have to break the rules sometimes, but to give us humans some stability he set things up so that he wouldn't have to break the rules.
So yes. I am saying what a lot of people probalby don't want to hear. God loves us, but he puts a value on human life. People aren't "priceless" per se, he won't go out of his way to save every person from suffering, because he knows that in the end his plan is good, and intervention is not needed.
So in conclusion:
1. God is a logical God that sees the beggining present and end, he set up rules @ the start and he sticks to them becaues his plan is perfect.
2. Rules result in good, bad and the ugly, God acknowledges that but the way he set it up marginal utility of rules>than its marginal cost. And i'm sure he has maximized that ratio.
3. God is not constrained by these rules, he is all powerful, but he lets them play out. Rules are sometimes bent and sometimes broken, but I would say relatively speaking miracles are the exception, not the rule.
4. Logical-ness is necessary for human existance. We need boundaries, we need rules to live, or else we would be stuck living in caves because life just wouldn't make sense.
Okay i'm sure i probalby need to add things, but thats basically it. I doubt anyone will read that whole thing, its pretty long, but i guess its more for me, it was all stuck in my head, i ahd to get it out.
GG all
Kevin
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| wow i haven't made a xanga entry in 1 a year 9 months and 13 days. I wonder who still reads this, haha.
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